The dark side of cryptocurrencies — financial pyramids, hacking and shadow trading

24.06.2022 |

About financial pyramids, hacks and shadow trading

In the beginning, bitcoin was the domain of geeks and fans of new technologies. Later, due to the peculiarities of the organization, and in particular, the ability to maintain a high level of confidentiality during payments, the first cryptocurrency began to be used for criminal purposes. However, the number of shadow transactions has never exceeded the volume of legal use of the innovative tool. But, as you know, knowledge is power, so in order not to get into an unpleasant situation, it is worth understanding how criminals use bitcoins for their own purposes.

Black Market

Bitcoin made it possible to organize trading on the Internet while remaining completely anonymous. However, the law enforcement agencies have long and quite well deployed their work in the network. Therefore, most of the major resources have already been closed, and their founders and major clients have either been arrested or are on the international wanted list.

The most popular resource of this kind, which every member of the cryptocurrency community knows about, is Silk Road. Silk Road used several approaches to anonymize its administrators and participants. So, it was one of the first truly large resources that could only be accessed from the TOR network. It is also the first platform where bitcoin has become a native means of payment.

Law enforcement officers managed to calculate the administrator and other key employees and collect a sufficient evidence base in just two years. In 2013, the founder and owner of Silk Road was arrested. As a result, Ross William Ulbricht received two life sentences and several more decades in prison. The release of the first creator of the largest shadow market in the network clearly does not threaten.

After the Silk Road, such platforms appeared and disappeared with enviable regularity, however, the special services do not stand still, and often, even at the moment of opening, undercover agents are already working in the structure of black markets.

Hacks and cryptographers extortionists

Cryptocurrencies have also found their use among hackers. Since the very beginning of the industry, hackers have successfully attacked both individual currency holders and entire major bitcoin exchanges. A series of hacks led to losses of millions of dollars, in terms of the current exchange rate. However, the community itself has found mechanisms to combat such crimes. So it is almost impossible to legalize and exchange the stolen, all the addresses to which funds are withdrawn during hacking are added to blacklists, and no one wants to have anything to do with these wallets.

The other side of hacking was encryption programs. These are viruses that encrypt files on your computer and delete the original. To get the key, you have to pay a ransom, most often in bitcoins. But even here, hackers cannot feel safe — special services can find criminals here.

Separately, you can highlight the hidden mining. Here the program can be installed on a computer without the owner’s knowledge and, using resources, performs calculations for the extraction of a particular cryptocurrency. Also, some sites have built—in malicious code that starts mining when visited, however, this type is finding less and less use - browsers have learned to recognize and block such scripts.

Financial pyramids and scams

During the period of popularity of ICO, the following scheme found its application: a project website was created, a white book was issued and for this project were collected money. In fact, no work on the creation of cryptocurrencies was carried out and the project itself was originally created as a fraudulent scam.

A larger application, which remains popular even now, is the diversion and laundering of funds from financial pyramids. Many Ponzi schemes still resonate in society, however, the current financial system is built in such a way that depositors’ funds can be quickly confiscated by the authorities and law enforcement agencies. Therefore, more and more financial pyramids accept deposits only in cryptocurrency. However, the lower and middle “employees” can still accept cash and non-cash transfers, which are later still transferred to bitcoin or other coins, after which they are sent to the organizers.


Here we have considered only some cases of the use of cryptocurrencies for criminal purposes. There are many more schemes and approaches for taking bitcoin to the dark side, but it is worth remembering that the percentage of such use remains at an extremely low level, and cryptocurrencies are increasingly being used as a means of investment and value transfer without the use of centralized services.

In any case, if you decide to purchase cryptocurrencies, you need to know about the blacklist of addresses, and about a possible scam, as well as about the security of storing digital currencies.